Thursday, November 1, 2012

Re-engineering Processes To Increase Productivity

Several years ago, this Blogger CEO determined that we needed to increase productivity to cut costs. There were two ways this could be accomplished. I could have just slashed staffing by 10% and unnecessary work would have just been eliminated because there would have been no one to do it, which was my preferred approach. Or, I was convinced by our Senior VP of Operations that we needed to implement re-engineering to more scientifically eliminate unnecessary processes and practices, which ultimately proved to be a road to no where.

In any case, a multi-disciplinary Task Force was convened to get the job done. The group spent almost two years, looking at every detail of our core services. The end result was that work was just shifted from one group to another. They squeezed the balloon and work just popped up some place else. With the exception of one department, that did make some tangible productivity gains, absolutely nothing was achieved. Ironically, it was that department's back office accounting work that was eventually off-shored to India at my insistence to cut costs. This CEO Blogger had been snookered. It is important to note that the particular Sr. VP who suggested re-engineering is no longer with our company.

And, then there are the productivity gains that are supposed to come from increased expenditures in automation.With the exception of the elimination of many old style secretaries that has occurred over the last 20 years because of word processing, gains in productivity as a result of more advanced automation is questionable because of the staffing requirements necessary to support the automation and the time needed to actually implement and use it.

In fairness, increased tracking of work is necessary today because of various client reporting requirements; although, we have added many automation bells and whistles over the years that staff members and sales people, in particular, tell us are absolutely essential to both supporting existing clients and signing new ones that clients never use. As a result, this Blogger CEO is often very skeptical of promised productivity increases that are supposed to come from advanced automation that just never seems to happen. We have state of the art automation today; yet just as many people implementing our services as before. Go figure.

In a service business 65 - 70% of expense relates directly to headcount. And, when dealing with any manager with direct reports, he or she will tell you we are under staffed in his or her department because if you go looking for unnecessary work, you will always find it. Since re-engineering failed to increase productivity in our company and there is a natural tendency toward growing staff, today this Blogger CEO approves all headcount additions, salary adjustments and promotions. This is possible because we are a Mid-Sized firm.

It would be impossible in very large firms for the CEO to take on these responsibilities. Instead, what happens in big companies is employee creep; that is staffing grows by a pretty good percentage each year in good times. Then when bad times hit, the CEO orders mass lay-offs as the way to control headcount and resultant costs. That is the reason it is often reported in the news that a big publicly traded company will lay-off 10% of its workforce, or several thousand people reflecting boom and bust cycles.

Be leery of project based re-engineering because it can be a path to no where and nothing more than a stalling tactic. Instead, practice continuous improvement always asking the open ended question, why do we do that? Since I spent 15 of my 33 years in business providing complex Consulting Services, this Blogger CEO has a great advantage in that Consulting is all about asking lots of questions. In addition, 33 years of multi-disciplinary experience in the trenches allows me to apply the smell test across business functions.

If it smells fishy, there is usually something wrong. Finally, just apply common sense and the principles learned in 5th grade math to improve processes and productivity. As a management principle, cards talk and numbers don't lie. Show me the numbers is always a good approach. It doesn't take two years and lots of wasted time to figure out that something is not working.This Blogger CEO got snookered once related to re-engineering. That will not happen again.